BioWorld Perspectives » SEChttp://www.bioworld.com/perspectives
news, analysis, debates, commentary and camaraderie related to the development of biotechnology drugsFri, 27 Mar 2015 22:17:55 +0000en-UShourly1http://wordpress.org/?v=3.5States move forward as SEC lags on crowdfunding ruleshttp://www.bioworld.com/perspectives/2015/01/29/states-move-forward-as-sec-lags-on-crowdfunding-rules/
http://www.bioworld.com/perspectives/2015/01/29/states-move-forward-as-sec-lags-on-crowdfunding-rules/#commentsThu, 29 Jan 2015 17:55:11 +0000Michael Fitzhughhttp://www.bioworld.com/perspectives/?p=1773With a new year, old impatience is growing among small companies and investors eager to see the potential of federally sanctioned crowdfunding take off. In January, biotech hotbed Massachusetts, as well as Oregon and Maine, joined a growing list of...

]]>With a new year, old impatience is growing among small companies and investors eager to see the potential of federally sanctioned crowdfunding take off. In January, biotech hotbed Massachusetts, as well as Oregon and Maine, joined a growing list of states taking matters into their own hands. Irritated by the SEC’s sauntering approach to finalizing proposed rules it drafted to implement crowdfunding provisions in the 2012 Jumpstart Our Business Startups (JOBS) Act, they joined a growing roster of states that have adopted their own rules for governing the offerings. (See BioWorld Insight, Aug. 11, 2014.)

Massachusetts’ new rules, like all the state crowdfunding rules adopted nationally, permit only intra-state investment. Companies can offer equity or debt securities under the exemption and may raise up to $1 million in a 12-month period, or up to $2 million if they have audited financial statements. Investors are allowed to purchase securities valued at the greater of $2,000 or 5 percent of their annual income or net worth if both their income and net worth are less than $100,000. For those with income or net worth of $100,000, the limit is the greater of 10 percent of their income or net worth, with an investment limit of $100,000.

The rules are “designed to foster job creation by helping small and early stage Massachusetts companies find investors and gain greater access to capital with fewer restrictions,” according to William Galvin, secretary of the state’s Commonwealth Securities Division.

Maine’s crowdfunding rules are somewhat similar, capping the aggregate amount of securities sold to all investors within a 12-month period at $1 million and limiting any individual non-accredited investor from investing more than $5,000.

Oregon crowdfunders get significantly less latitude. Companies there can raise up to $250,000 from Oregon investors to start new businesses or fund existing operations and no single investor can invest more than $2,500 in any one investment.

In December, Sens. Michael Bennet (D-Colo.) and Jeff Merkley (D-Or.) wrote to SEC chairwoman Mary Jo White to urge her to “expeditiously” finalize crowdfunding regulation, something it was required to have completed by now. “Given the heavy workload that the Commission still has before it has finalized the reforms of the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are concerned that completing regulations for Title III of the JOBS Act may remain continuously delayed,” they wrote.

White responded this month, writing that finalizing the rules “remains a priority” and noting that the SEC is considering public feedback and “actively working” to develop final rule recommendations that would both “promote capital formation and provide robust investor protections.”

But with Indiana, Texas, Washington, Wisconsin and others jumping on the bandwagon with their own rules, the patchwork of who can fund what where and for how much is rapidly becoming fragmented. And with no open meetings scheduled to consider finalizing the rules currently on the SEC’s calendar, it looks like would-be crowdfunders and the entrepreneurs they support will have to wait for rules that would throw open the doors to out-of-state and international investors.

]]>http://www.bioworld.com/perspectives/2015/01/29/states-move-forward-as-sec-lags-on-crowdfunding-rules/feed/0Biotech’s White Knight (aka Serial Cheater) Gets Prison Time, Finallyhttp://www.bioworld.com/perspectives/2013/05/03/biotechs-white-knight-aka-serial-cheater-gets-prison-time-finally/
http://www.bioworld.com/perspectives/2013/05/03/biotechs-white-knight-aka-serial-cheater-gets-prison-time-finally/#commentsFri, 03 May 2013 19:41:23 +0000Lynn Yoffeehttp://www.bioworld.com/perspectives/?p=1353It’s been 16 years since I first reported in BioWorld Today that David Blech was charged with securities fraud. In April 1997, I reached him at his New York office a few days after his arraignment in a U.S. District...

]]>It’s been 16 years since I first reported in BioWorld Today that David Blech was charged with securities fraud. In April 1997, I reached him at his New York office a few days after his arraignment in a U.S. District Court. Though he wouldn’t comment on the case, he chided me repeatedly for using the word “arrested,” insisting that I tell our readers he “appeared voluntarily” for the arraignment, still worried about his reputation ‑ as if it wasn’t already rubbish.

Frankly, I’m satisfied he’s going to serve time. Angry that our judicial system can’t penalize him with a longer sentence given the repeated widespread impact his actions have had on our industry. Amazed at his gall to repeat his offenses. Unforgiving that he blames his bipolar disorder for his misdeeds.

Blech’s troubles began in September 1994 when his investment boutique, D. Blech & Co., suffered a liquidity crisis as capital reserves dipped below federally regulated levels and ceased trading activities on Nasdaq. The news sent the stock prices of numerous Blech-financed biotech start-ups spiraling down in an already bear market. His company’s portfolio of 11 biotech firms lost more than $168 million in market capitalization in one day.

Blech, who founded his investment firm in 1990, was touted as the financial “white knight” of biotech start-ups. Four years later when his empire crumbled, some of his brokers not only received rubber paychecks, but they also were left without even the most basic tools of the trade, including telephones. It was really sad.

His former brokers said he ran “a sleazy boiler room operation,” pressuring them to get clients to buy newly issued shares in companies underwritten by Blech and urged them just as strongly to advise those clients not to sell if the price started rising.

As the years stretched on, it only got messier.

A Florida attorney for former D. Blech & Co. employees was sentenced to five months in prison for obstructing an SEC investigation in 1997. Lloyd Schwed, of Jupiter, Fla., pleaded guilty in November 1996 to withholding and agreeing to destroy tapes subpoenaed by the SEC. Schwed represented the 10 former brokers in complaints filed against Blech. The brokers were ultimately awarded hundreds of thousands of dollars in damages stemming from the collapse of Blech’s business.

In 1997 he was charged with scheming to defraud Bear Sterns & Co., which provided clearing services for securities transactions made by Blech’s brokerage firm. But the judge felt sorry for him and refused to accept a guilty plea when he learned Blech was on meds for manic-depression.

Too bad. Because he turned right around and did it again. Blech made major stock purchases in three companies in 1997 ‑ Gene-Medicine Inc., Escalon Medical Corp. and Homecom Communications Inc ‑ without having enough assets to pay for them.

Who would stop this guy? U.S. District Judge Colleen McMahon slammed the gavel down this week.

The Associated Press reported that McMahon repeatedly scolded Blech during sentencing, which includes four years plus $1.3 million forfeiture. She called him a “serial stock manipulator” because he committed the same crime four times even after being granted leniency when he swore he wouldn’t commit another crime. Hooray for a strong judge.

So, almost two decades since the troublemaking started, I say good riddance, David Blech.